Quick Company manufactures toasters. For the first eight months of 2012, the company reported the following operating results while operating at 75% of plant capacity:
Sales (400,000 units) ........................................ $ 4,000,000
Cost of goods sold ............................................. 2,800,000
Gross profit ..................................................... 1,200,000
Operating expenses ............................................. 900,000
Net income ...................................................... $ 300,000
The cost of goods sold was 75% variable and 25% fixed; operating expenses were 70% variable and 30% fixed.
In September, Quick Company receives a special order for 50,000 toasters at $8 each from Ortiz Company of Mexico City. Accepting the order would result in $8,000 of shipping costs but no increase in fixed operating expenses.
Instructions
(a) Prepare an incremental analysis for the special order.
(b) Should Quick Company accept the special order? Why or why not?